Price increases- Revenue decreasesPrice decreases- Revenue increases

How does revenue react to price under Inelastic Demand?

Price increases- Revenue increases

Price decreases- Revenue decreases

What conditions would indicate Inelastic Demand?

Few substitutes (groceries- gasoline)Considered inelastic if coefficient of elasticity is less than 15% drop in demand / 10% increase in price : .5 (inelastic)

Price increases- Revenue increasesPrice decreases- Revenue decreases

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What is Unitary Demand?

Total revenue will remain the same if price is increased

Considered unitary if coefficient of elasticity : 1

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How is Income Elasticity of Demand calculated?

% Change Quantity Demanded / % Change in Income

Normal goods greater than 1 (demand increases more than income)

Inferior goods less than 1 (demand increases less than income)

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What conditions occur under periods of inflation?

Interest rates increaseReduced demand for loansReduced demand for houses- autos- etc.Value of bonds and fixed income securities decreaseInferior good demand to increaseForeign goods more affordable than domesticDemand for domestic goods decrease